From rival to reluctant partner: India’s evolving stance on Chinese investment Premium

India's push to rival China in manufacturing faces hurdles, prompting New Delhi to consider easing restrictions on Chinese investments.

India's push to become a factory titan has hit a snag: to become a credible alternative to China for global firms, it first needs to warm up to its long-time rival.

Ties between the world's two most populous countries have been strained since the border clash in 2020, slowing the exchange of capital, technology and talent, despite exploding demand for electric vehicles, semiconductors and artificial intelligence. The Modi government's heightened vetting of all Chinese investment over this period effectively turned away billions of dollars from the likes of BYD, Great Wall Motor and created new layers of red tape for Indian firms with Chinese stakeholders.

But now, New Delhi is looking to loosen some of these restrictions as businesses struggle to scale up manufacturing, even with a host of government subsidies designed to boost local production.

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"There is a realisation that you cannot be part of any major supply chains, especially in high technology products and certain areas like solar cells, EVs, where it is not possible for you to do anything without being part of Chinese supply chains," said Sushant Singh, lecturer at Yale University, who has also been a researcher for public policy think tanks in India.

Even businesses that have supported barriers on Chinese imports acknowledge the need for key inputs from up north.

Naveen Jindal, head of one of the country's largest steel firms Jindal Steel & Power and a federal lawmaker, has backed tariffs on Chinese steel but also sees the need for a pragmatic approach to trade.